20090105_2452.pdf

DECISION MEMORANDUM
TO:COMMISSIONER REDFORD
CO MMISSI 0 NER SMITH
COMMISSIONER KEMPTON
COMMISSION SECRETARY
COMMISSION STAFF
FROM:DONN ENGLISH
DATE:JANUARY 5, 2009
SUBJECT:IN THE MATTER OF A VISTA UTILITIES' REQUEST FOR
AUTHORITY TO DECREASE ITS RETAIL RATES FOR NATURAL
GAS.
On September 30, 2008, the Commission approved Avista Utilities' annual Purchased
Gas Cost Adjustment (PGA) Application requesting authority to increase its annualized revenues
by $11.6 million. Order No. 30646. Within its PGA Application, the Company affirmed that
current commodity futures prices dictated the use of a $0.78646 per therm weighted average cost
of gas (W ACOG) for its Schedule 150 Tariff and an amortization rate of 1.727 cents per therm
for its Schedule 155 Tariff to refund to customers the credit balance in the deferred gas cost
account.
On January 2 2009, Avista filed an Application with the Commission for authority to
decrease its rates. More specifically, the Company seeks to increase its Schedule 155
amortization rate by 5.984 cents per therm, refunding to customers approximately $4.0 million
between January and October 2009. This decrease reflects the refund of the increase in deferred
gas costs due to customers since the Company s original PGA filing on August 18 2008
updated September 12 2008 for decreases in the WACOG. Avista s earnings will not be
decreased as a result of the proposed changes in prices and revenues. The Company requests
that new rates become effective January 6, 2009.
APPLICATION
With this Application, A vista seeks to refund to its Residential, Large General and
Interruptible customer classes on Schedules 101 111 and 131 respectively, approximately 72% of
the $5.6 million deferral balance on November 30, 2008. The proposed changes would be
DECISION MEMORANDUM JANUARY 5 , 2009
applicable to service rendered under the rate schedules affected by and subject to Avista s annual
PGA.
The Schedule 155 amortization rate currently in rates is designed to return to customers
approximately $1.3 million from October 1 , 2008 - October 31 , 2009. Since September 30
2008 wholesale natural gas prices have continued to fall below the projected prices included in
the PGA filing. As a result of lower-cost gas purchases, deferred gas costs due to customers
have grown significantly. This filing proposes to adjust the amortization rate to refund
approximately $4.0 million dollars to customers based on projected customer usage between
January 6 and October 31 2009. The Company is not, however, proposing to decrease the
W ACOG at this time.
The approximately $4 million refund to customers represents 72% of the deferral balance
of$5.6 million at the end of November. The Company states that refunding the entire $5.
million would result in a refund rate of approximately ten cents per therm and would increase the
possibility of a rate increase in the 2009 PGA filing. The Company contends that the present
state of the economy and customers experiencing higher winter heating bills, reducing natural
gas rates is appropriate at this time.
STAFF RECOMMENDATION
Staff has reviewed the Company s filing and proposed Schedule 155 amortization rate to
refund to customers approximately $4 million dollars during the remainder of the current PGA
year. Although a larger decrease could be warranted, the potential for an increase later in 2009
would be greater. The Company will continue to defer all cost differences between the W ACOG
included in rates and the actual cost of gas incurred, and will continue to accrue interest on the
balance of the deferrals. Therefore, Staff recommends that the Company s Application
requesting authority to decrease its rates be approved without further delay or comment to be
effective January 6 2009.
COMMISSION DECISION
Does the Commission wish to approve the Company s Application to decrease rates
without further comment?
i:udmemos/Avista PGA 08 decrease
DECISION MEMORANDUM JANUARY 5 , 2009